Analyst ReactionsAside from Stifel (who didn't like the company anyway), targets still range from $30 to $34 so we have yet another overreaction, not surprising on a day like today. GLTA
ATB Capital Markets’ Chris Murray sees NFI Group Inc. supply chain issues as a “a significant, albeit manageable, near-term headwind.”
The equity analyst said he was “surprised” after the Winnipeg-based bus manufacturer cut its full-year 2021 financial guidance on Friday, citing the “impact of escalating supply chain disruptions and logistics delays resulting from the ongoing COVID-19 pandemic.” It said conditions have deteriorated since the Aug. 4 release of its second-quarter results, where it reaffirmed its confidence in its financial targets, and now expects to see an impact from the difficulties extending into the first half of 2022.
However, Mr. Murray sees NFI remaining “well-positioned to benefit from a longer-term, secular shift towards zero-emission forms of public transportation with cost-savings sourced from NFI Forward supporting its medium-term (2025) EBITDA target of $400-million-$450-million.
“While we anticipate that the impact of the pandemic will result in some choppiness in results over the near-term, longer-term we see the company having a dominant position in electric vehicles in its class for several years,” he added.
“While our revised estimates call for leverage to increase through Q4/21, we see flexibility around the covenant structure given the impact of the pandemic with more normalized levels of EBITDA reducing leverage levels in 2022. Despite the headwinds, management projects that it will have $400-million in liquidity at Q4/21 which we view as sufficient to support near-term operations while maintaining the current dividend.”
Mr. Murray cut his 2021 adjusted EBITDA and fully diluted earnings per share projections to $175.6-million and a loss of 3 cents, respectively, from $238.5-million and 88 cents. His 2022 estimates slid to $271.8-million and $1.06 from $311.7-million and $1.58.
Keeping an “outperform” rating for NFI shares, he also lowered his target to $34 from $38. The average on the Street is $32.31.
Elsewhere, Stifel analyst Maggie MacDougall downgraded NFI to “sell” from “hold” with a $22 target, down from $27.50.
“The supply chain challenges unfortunately bring financial leverage once again to the forefront. We believe that NFI is likely to receive covenant relief for 2022; however, given a lack of visibility on supply chain resolution and high debt, we question the logic in maintaining a $45-million annual dividend,” she said.
Others making changes include:
* Scotia Capital’s Mark Neville to $32 from $34 with a “sector outperform” rating.
“The fact that NFI is facing (seemingly escalating) supply chain challenges, including logistical delays/inflation, should not come as a surprise – as the issues are global, and impacting many industries and manufacturers,” said Mr. Neville. “As such, a 2021 guidance reduction likely won’t come as a major surprise. However, the magnitude of the revision might: 2021 adj. EBITDA was guided down 22 per cent, implying 2H/21 adj. EBITDA 40 per cent below management’s prior expectations.”
* CIBC World Markets analyst Kevin Chiang to $30 from $34 with a “neutral” rating